PUBLIC POLICY

This year's Public Policy Fly-In was better than ever. The quality of the contacts made by WMMA members gets better each year. The timing of the Fly-In allowed us to get our last two cents in regarding the stimulus bill.

After we left Congress passed the American Recovery and Reinvestment Act and the President signed it into law as Public Law 111-5. It does include several provisions of interest to WMMA members. The two big ones are the extension of the temporary increase in the direct expensing allowance and the bonus depreciation.

Basically, the provisions are the same as the 2008 versions, just that they now extend through 2009. Therefore, to the extent you have included explanations in your marketing materials, the principal change are the dates.

The law provides for a first-year depreciation "bonus" deduction equal to 50 percent of the adjusted basis of qualified property placed in service during 2009.

Under present law, there was a temporary increase in the maximum amount a taxpayer could expense for taxable year 2008 under Section 179 of the tax code. The amount was $250,000 of the cost of qualifying property placed in service in that taxable year. The new legislation extends the $250,000 maximum through 2009.

In 2008, the $250,000 amount was reduced (but not below zero) by dollar for dollar by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $800,000. This will now be the case for 2009.

It is important to note that this extension is a temporary increase. For taxable year beginning in 2010, the limitation goes back down $125,000, and the cap is $500,000. Both these amounts will be indexed for inflation. For taxable years beginning in 2011 and thereafter, the amounts are $25,000 and $200,000 respectively and are not indexed for inflation.

As was the case under the current temporary bonus depreciation, under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted basis after subtracting any section 179 deduction taken on that property of qualified property during the year the property is placed in service. For example, if the taxpayer purchased and placed in service in 2009 a single piece of property at a cost of $450,000 that qualified for section 179 expensing and the 50 percent special depreciation allowance, $250,000 of the cost could be immediately expensed (under section 179) and the remaining $200,000 of adjusted basis would be available for the 50 percent special depreciation allowance. The taxpayer would also be permitted to take regular depreciation on the remaining $100,000 of adjusted basis during that year.

Under present law, a net operating loss (NOL) generally means the amount by which a taxpayer's business deductions exceed its gross income. In general, an NOL may be carried back two years and carried over 20 years to offset taxable income in such years. NOLs offset taxable income in the order of the taxable years to which the NOL may be carried back. The alternative minimum tax rules provide that a taxpayer's NOL deduction cannot reduce the taxpayer's alternative minimum taxable income (AMTI) by more than 90 percent of the AMTI. There are a host of other rules for special situations.

The new law will permit an eligible small business to elect to increase the present-law carry back period for an applicable 2008 NOL from two years to any whole number of years elected by the taxpayer that is more than two and less than six. An eligible small business is a taxpayer meeting a $15,000,000 gross receipts test. Corporations, partnerships, and sole proprietorships are all included. The general rule for the gross receipts test is a business meets the $15,000,000 gross receipts test for any prior taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with such prior taxable year does not exceed $15,000,000.

An applicable NOL is the taxpayer's NOL for any taxable year ending in 2008, or if elected by the taxpayer, the NOL for any taxable year beginning in 2008. However, any election under this provision may be made only with respect to one taxable year.

I guess if there was one disappointment, it was that we were not able to convince Congress to adopt the Senate version of the homebuyer's credit. Congress opted to make only minor changes to the current temporary first time homebuyer's credit. The new law extends the existing homebuyer credit for qualifying home purchases before December 1, 2009. In addition, it increases the maximum credit amount to $8,000 ($4,000 for a married individual filing separately) and waives the recapture of the credit for qualifying home purchases after December 31, 2008 and before December 1, 2009. The Senate had approved a much broader credit for all homebuyers but that was not included.

One of the things we need to get better at as an organization is building on the contacts we make during the Fly-In through the course of the year. We are committed to providing you with even more information to help you work with your Senators and Representatives.

Special Offer to WMMA Members John Satagaj has made available to members a monthly publication, Washington Report, which he will email directly to interested members at the beginning of each month. If you have not already informed Association Headquarters you would like to be on the distribution list, please contact us. In addition, please go to the Members' Only portion of the Web site every week to read the latest Small Business Legislative Weekly report. These materials are protected under copyright law and contain confidential information. It is for the sole personal, informational use of WMMA members and may not be reproduced or distributed in any manner. Thank you. Employee Free Choice Act Click here to get a John Satagaj March 2009 update on legislation and a call to action and an update from the National Association of Manufacturers. Look under the News and Announcements section. INTERNATIONAL BUSINESS DEVELOPMENT Thoughts on Delhiwood, New Delhi, India, February 14-17, 2009, by Harold Zassenhaus, zemg@erols.com The following are observations of the fair, the Indian woodworking equipment market and potential for WMMA members both as a market in its own right and as a country for outsourcing product or component production. Under the umbrella of the American Center for Wood Processing Pvt. Ltd., the WMMA exhibited in a new woodworking equipment fair in the north of India, Delhiwood. The ACWP is an Indian company established with the support of the WMMA to represent U.S. woodworking equipment producers in India. To learn more about this unique distributor/marketing/sales organization, please visit its Web site, www.acwpi.com, or go to the WMMA members' only area, http://www.wmma.org/members/imp.cfm. As with Indiawood, Delhiwood was organized by PDA Trade Fairs and sponsored by EUMABOIS, the European Federation of woodworking machinery associations. At Delhiwood, from left to right: Ken Anselm, Chairman of the Board, American Center for Wood Processing, Pvt., Ltd., long time WMMA member; V.K (Gundu) Subramanya, Acting Managing Director, ACWP, Sharu Grover, Commercial Assistant, U.S. Embassy, New Delhi; Carmine D'Aloisio, Minister Counselor, U.S. Embassy, New Delhi.   WMMA member company Safety Speed Cut exhibiting at Delhiwood   WMMA member company Unique Machine exhibiting at Delhiwood   WMMA member companies James L. Taylor and C.R. Onsrud exhibiting at Delhwood Delhiwood Pragati Maidan, Delhiwood's venue, is located close to the center of Delhi and is a large, aging complex of many halls the latest of which was constructed in the early 1990s. Delhiwood occupied two halls (14 and 18) of the complex. The facilities were passable, at best. The fair occupied 16,300 sq. meters with about 300 exhibitors and attracted about 13,400 visitors per the organizer. This compares with the 2008 Indiawood held in Bangalore that occupied about 20,000 sq. meters, with 420 exhibitors and had 20,000 visitors. Germany organized a pavilion and occupied most of Hall 14, while Italy had pavilions in both halls. Taiwan supported exhibitors in Hall 18. The 4-day fair ran from Saturday through Tuesday. Attendance was very good and steady with Saturday and Sunday predictably generating the most traffic and Tuesday the least. However, even Tuesday's traffic was respectable and many attending were there to finalize purchases (more on Indian buyer habits below). Delhiwood will likely return in 2011. The 2010 event, Indiawood, will be held in Bangalore March 4-8. ACWP Pavilion Eight members took out space within the 91.5 sq. meter ACWP area: UC Coatings C.R. Onsrud The Original Saw Mattison Rotary Lathes   James L. Taylor Safety Speed Cut Castle Unique Machine Three additional members shared WMMA portion of the booth: Komo Morris Wood Tool Hermance Machine An additional WMMA member, Wood-Mizer, exhibited through its dealer. In advance of the fair, the WMMA and ACWP implemented a marketing campaign consisting of: Printing and inserting into an Indian trade publication, Modern Woodwork, a 24-page booklet highlighting the ACWP, WMMA and 10 participating members. Over 20,000 copies of the booklet were inserted into the pre-show issue and another 5,000 were made available to the ACWP for handout at the booth. Targeted mailing to and calls on prominent woodworkers by the ACWP staff in India. The "show daily" featured the ACWP/WMMA pavilion and USA exhibitors on the first day. The stand was well located in Hall 18, opposite one of the larger dealers (Woodtech) and across the isle from both Biesse and one of the Italian pavilions. The pavilion design was good and the area could easily be seen by those entering the lower area of the hall. Booth traffic was steady and at times heavy as visitors were keenly interested in the equipment being exhibited and demonstrated. Over 400 leads were generated, the large majority for those exhibiting equipment. None of the equipment on display was sold and the scenario, first played out in 2008, was repeated. A number of individuals were "going to buy" but by the end of the show did not. The Market The following are some basic facts on India (additional country insight can be accessed at the WMMA members' only area, http://www.wmma.org/members/imp.cfm, and The Economist's country briefing website, http://www.economist.com/countries/India): GDP (2007): approximately $1 trillion GDP per head (2007): $846; $2,527 in purchasing parity terms Real GDP Growth, est.: 2009: 5.6% World Economic Ranking: 12th; 5th largest in purchasing-power parity terms Population, est. 2007: 1,025 million No. of middle class consumers: 50 million No. of est. middle class consumers by 2025: 580 million Youth Power: Over 58 percent of the Indian population is under the age of 20. That is over 564 million people, nearly twice the total population of the United States. Woodworking industry facts and trends: Jan-Sept. 2008 worldwide exports of woodworking equipment to India: $57 million. Largest suppliers: Germany (20%), China (15%) and Taiwan (10%). The U.S. is the 10th largest supplier with a 2% import market share. Growth rate, woodworking equipment shipments to India: 65% 2008/2007 (Jan.-Sept.). Estimated number of housing units needed per annum: 8.9 million. 2006 Furniture production (Csil): $2.9 billion. Market Insights Gained During Delhiwood India is only mildly affected by the global slowdown; estimated growth rate has been reduced from 8-9% to 5.6% for 2009. IT sector is hardest hit and furniture demand in southern India is slowing as a result. Woodworking equipment demand is greatest in the northern part of the country. Northern area businesses are quicker to make decisions than those in the south. Local demand continues to be the driving force behind the woodworking industry. India continues to be dominated by three major equipment distributors/agents: HBR Consultants, Pvt. Ltd., which represents major Italian and German manufacturers (including Weinig); Homag India and its dealer division, Ramu Machinery Pvt. Ltd., that represents mostly Italian and Taiwanese manufacturers; Woodtech Consultants Pvt. Ltd. which mainly represents Taiwanese equipment but also represents suppliers from Italy, Spain, Australia. Together, they probably account for over 75% of foreign equipment sales in India. Marketing Strategies The market has significant potential and WMMA members, showing patience and persistence, could be successful. However, as with any developing market there are a number of challenges, not the least of which is price point. Although most Indians prefer not to buy Chinese or Indian made equipment, price is a major factor. And, even if the purchaser is committed to buying a high quality product there will be hard price bargaining before the dust settles. To play into the local demand for discounts many suppliers adopt a pricing policy of adding 20 percent to their normal price with the assumption that through bargaining the negotiated price will fall in line with original guidelines. Members will need to have their distribution channels and servicing centers in place to take advantage of this market. Otherwise, Indians will gravitate to traditional European suppliers in seeking high production/flexible machinery that can keep tight tolerances. The larger existing dealerships already have a staple of foreign suppliers and are reluctant to add others unless the supplier has unique advantages. In this regard India is no different than other developing markets like Russia and Turkey. Yet, WMMA members have an opportunity to bypass or complement existing dealers by becoming participants in the WMMA supported and sponsored American Center for Wood Processing Pvt. Ltd., http://acwpi.com/, where they can benefit from: Local logistical service Warehousing Sales support staff Servicing staff Other HR support as required To reiterate, most Indian woodworkers will not change their tune easily—price is the driving force in making a purchasing decision. On the whole, the Indian purchaser wants a quality product but at a "reasonable" price. Some European companies have begun to tackle this issue by fabricating locally (see Thoughts on Indiawood 2008). A practical approach for some members will be to outsource component or product production. Local production of components or product can reduce the landed price by as much as 34 percent just by avoiding the import duties and levies. India has an ample supply of metal fabrication shops able and willing to manufacture members' products and/or components. As a source, India provides significant advantages over other countries: High quality production facilities already producing for the local and overseas automotive, aerospace, plastics, medical care and IT industries Relatively low manufacturing wage rates English as a spoken language Strong, and still growing economy Sound banking system Sound and relatively consistent regulatory environment Country export incentives and duty drawbacks for imported components if incorporated into exported products BUSINESS DEVELOPMENT Sales Forecasting Tools (Members Only) Construction Put in Place—January 2009 Manufacturers' Shipments, Inventories and Orders—January 2009 Manufacturing and Trade Inventories and Sales—December 2008 New Residential Construction—January 2009 Purchasing Managers' Index—February 2009 The Purchasing Managers Index edged higher for the second consecutive month as did the 1/12 rate-of-change. The moves are encouraging in terms of seeing the recession dissipate toward the end of this year. U.S. Leading Indicator—January 2009   Executive Briefings, Penn State's Center for Wood Innovation and Sustainability A new newsletter will disseminate information from the Center for Wood Innovation and Sustainability. The Center is kicking off 2009 with the goal of providing wood industry leaders with valuable information to help them make better business decisions. With this first issue, economic forecaster Bob Berg gives his analysis of the housing market for 2009 and where he thinks we're going in the future. Berg bold predicts that we may soon be seeing the bottom of the housing bust. Click here to read the full issue. NEWS YOU CAN USE Workshop on Remaining Competitive in Hardwood Components Production—April 20-21 An upcoming workshop on "Remaining Competitive in Hardwood Components Production" will be held at the USDA Forest Service Wood Education and Resource Center (WERC) in Princeton, WV on April 20—21, 2009. This workshop is sponsored by the USDA Forest Service's Wood Education and Resource Center (WERC) and the National Hardwood Lumber Association. Organizers include Virginia Tech, USDA-FS WERC, NHLA, Wood Component Manufacturers Association (WCMA), Wood Digest magazine, the Sloan Foundation Forest Industries Center (SFFIC) and Virginia Cooperative Extension (VEC). Experts in three areas will address: The current state of the economy and the wood industry Lean thinking and manufacturing (with an industry visit) Wood certification Sponsorship opportunities for the workshop exist for $400.00 including one person's registration. Click here for more information and to register. Also, Virginia Cooperative Extension (VCE), Virginia Tech's Department of Wood Science and Forest Products in the College of Natural Resources, the Sloan Foundation Forest Industries Center (SFFIC), and the USDA Forest Service will be offering regional workshops in Virginia regarding Lean Thinking and Pallet Recycling. Four Lean Thinking workshops are planned as follows: Workshop 1—Harrisonburg, VA—March 24, 2009 Workshop 2—Abingdon, VA—April 2, 2009 Workshop 3—Virginia Beach, VA—May 7, 2009 Workshop 4—Danville, VA—May 14, 2009 Information can be found at: http://www.woodscience.vt.edu/leanthinking/ Four Pallet Recycling workshops are planned as follows: Workshop 1—South Boston, VA—March 26, 2009 Workshop 2—Chesapeake, VA—April 9, 2009 Workshop 3—Abingdon, VA—April 30, 2009 Workshop 4—Front Royal, VA—May 5, 2009 Information can be found at: http://www.woodscience.vt.edu/palletrecycling/ GSO Regional Conformity Assessment Scheme—Webinar, March 31 The National Electrical Manufacturers Association (NEMA) is co-sponsoring a 90-minute webinar on Tuesday, March 31 on standards in the Gulf Cooperation Council (GCC) which includes Saudi Arabia, the UAE, Bahrain, Oman, Kuwait and Qatar. In 2008, the Gulf Standardization Organization (GSO) announced the planned introduction of a new conformity assessment regulation that will be applicable to low-voltage electrical products imported into the six member countries of the GCC replacing all existing product certification schemes. The emerging scheme is still in the early implementation stages. Accreditation, marking, testing, date of adoption, etc. will be introduced and discussed during this webinar. Questions will be answered by subject matter experts. The cost is $99.00 for a NEMA member, $149.00 for a non-member. Click here for more information or to register. ASSOCIATION NEWS WIC 2009: Another Byproduct of the Economic Downturn On March 11, the leadership of the three sponsoring associations—WMMA, WMIA and AWFS—made the difficult decision to cancel the 18th Annual Woodworking Industry Conference. Despite registrations by many members of all three associations, attendance did not reach a level that justified going forward with the Conference, whose costs are underwritten in part for the membership by the associations. Registered attendees will be contacted about full refunds by the respective associations to which they submitted payment. WMMA, WMIA and AWFS have always provided their members with first class events, and it is important to continue to do so. Please mark your calendars for WIC 2010 (Wednesday April 21st through Saturday April 24th) in Monterey, CA. Important New WMMA Market Research Survey Details Woodworking Industry Trade Show Attendance and Purchasing Behaviors WMMA surveyed more than 42,000 woodworking industry professionals in December 2008 to better understand their activities regarding trade show attendance and purchasing behaviors. This survey and other market research studies are sponsored by the WMMA Business Development Committee, under the leadership of Todd Sommerfeld, Kreg Tool Company. In addition to profiling respondents on a variety of business characteristics, the current study also addressed: Number of trade shows attended in the past 12 months. Comparisons of regional and national trade shows on various factors. Expected changes in attendance at regional trade shows over the next three years. The most important benefits derived from trade show participation. Whether or not regular attendee of IWF. Attendance at IWF 2008. Reasons did or did not attend IWF 2008. Preferred show in the woodworking industry. Categories for which involved in purchasing. Categories of interest at IWF 2008. Purchases made at, following or still pending as a result of attending IWF 2008. Reliance on manufacturers or distributors/dealers for purchases. Reliance on trade shows to make equipment decisions. Importance of online research in the evaluation of woodworking machinery/equipment and future expectations. Awareness and interest in the concept of a virtual trade show. WMMA members can download the extensively detailed study here: http://www.wmma.org/members/secureDocument.cfm?docID=1372 (2MB). Among the study conclusions, Quail Run Business Solutions which conducted and analyzed the survey, noted that industry professionals appear to perceive a value in trade shows and conferences in providing exposure to new ideas, products, vendors, processes, etc. Many go with the intent to evaluate new products, including equipment/machinery. Meeting and evaluating vendors is a key reason to attend IWF. Manufacturers who do not participate in key trade shows may be missing an important opportunity for potential buyers to see and work with their machinery/equipment. At this juncture it doesn't appear that prospective attendees are planning to make serious reductions in their participation in trade shows. This is based both on stated intentions to continue to participate as well as based on their statements of the benefits they derive from their overall trade show participation as they look for products, services and ideas that can help them operate their companies better and, perhaps, more profitably. And, very few say they are relying less on trade shows to make decisions for equipment/machinery purchases. In fact, more than twice as many report even greater reliance on trade shows for machinery/equipment decisions than in the past. Overall, these findings support other research on the value of IWF conducted previously for WMMA. Prior market research studies can be found here http://www.wmma.org/members/bus_develop.cfm. Membership Services Committee Seeks Manufacturing Members Are you looking to get involved in the industry and association to enhance your business and the industry? Consider becoming a volunteer member of the Membership Services Committee. The Committee is seeking individuals who embrace change, while maintaining the strengths of the existing organization and identifying the key challenges facing the association and industry. To learn more about the responsibilities and benefits of committee membership, please contact Association Headquarters. Tim Mueller, Timesavers Inc. is Committee Chair. MEMBER NEWS Accu-Router Wins Ovation Award for Manufacturing Innovation WMMA member Accu-Router, Incorporated of Morrison, TN is being recognized with the 2009 Ovation Award for Manufacturing Innovation in the March issue of the Cumberland Business Journal (TN). A story in the monthly publication, which has a distribution of 10,500 readers in 15 counties, provides details about Accu-Router's Green CNC program, through which it can deliver cutting edge fabrication equipment at over $50,000 material savings. "Now more than ever, our customers are trying to do more with less," explains Accu-Router President Todd A. Herzog and past president of WMMA. "For years, customers would scrap the metal in worn-out machine tools and their $175,000 original investment along with it." Closely partnering with key accounts, Accu-Router endeavored to find a better way. Since its inception in 1982, Accu-Routers have always featured a heavy-duty structural platform, often exceeding 15,000 pounds. Since the stationary bridge design has remained relatively unchanged, and steel doesn't deteriorate, why not salvage that platform and make it better than ever? Green CNC's can be modernized for the original owner or customized for someone new, who will save over $50,000 by revitalizing steel weldments, enclosures, and the aluminum machine table. Next generation performance is achieved by adding new motion components—ballscrews, spindles, tool changers, GE Fanuc electronics and drives, etc—with a full new machine warranty. "The goal of the annual Ovation Awards is to call attention to outstanding businesses, professionals, industries, nonprofits, agencies and individuals in our readership area," said Claudia Johnson, editor-in-chief of the Cumberland Business Journal. "Accu-Router is certainly a worthy recipient of this recognition." Johnson said Accu-Router was among several excellent candidates from across the Upper Cumberland region for consideration as a recipient of the 2009 Ovation Award for Manufacturing Innovation.

©2009 by Wood Machinery Manufacturers of America, Philadelphia, PA. All rights reserved. This publication or any parts of it may not be reproduced in any form without written permission from the publisher. For permission to reprint articles or to send correspondence, write to: WMMA, 100 North 20th Street, 4th Floor Philadelphia, PA 19103-1443 Phone: (215) 564-3484 Fax: (215) 963-9785 E-mail: info@wmma.org The opinion expressed in any articles by outside consultants are their own views and not necessarily those of the WMMA.